Semiconductor market in 1Q 2023: End of the steep fall, close to bottom

Date: 04/05/2023
After few tumbles since 3rd quarter of 2022, did semiconductor market hit the bottom of the curve in the 1Q 2023? There are signs of hitting the bottom or just getting close to the bottom. In the second half 2023, demand is expected to gradually recover.

With the semiconductor market started witnessing the downfall in the month of August 2022; it was a deep fall for many vendors who are too tied to personal computer and smart-phone market. Where as semiconductor vendors who are into industrial, aero/defence and automotive markets continue to earn near stable revenues with less than 5% drop in some cases. Here in this article, I try to bring out overall semiconductor market status and quarterly revenue growth/fall of some key semiconductor vendors in the first quarter of 2023.

Overall Global semiconductor market:
To share you the latest overall market data on semiconductors in the first quarter 2023; Semiconductor industry Association (SIA) reported global semiconductor industry sales totaled $41.3 billion during the month of January 2023, a decrease of 5.2% compared to the December 2022 total of $43.6 billion and 18.5% less than the January 2022 total of $50.7 billion. The downfall continued through month of February, where SIA reported global semiconductor industry sales totaled $39.7 billion during the month of February 2023, a decrease of 4.0% compared to the January 2023 total of $41.3 billion and 20.7% less than the February 2022 total of $50.0 billion. But for the month of March, it looks like the industry has hit bottom of the curve, where SIA finds sales for the month of March 2023 increased 0.3% compared to February 2023.

Irrespective of SIA reporting a very slight growth, some good growth may come in the later part of second quarter of 2023 or in the beginning of third-quarter 2023, provided global economic improves with higher GDP and less geo-political tensions. AI needs some regulations for it to grow and enable growth of semiconductor market.
On the global semiconductor markets quarterly figures, SIA announced worldwide sales of semiconductors totaled $119.5 billion during the first quarter of 2023, a decrease of 8.7% compared to the fourth quarter of 2022 and 21.3% less than the first quarter of 2022.

Gartner, a long time source on semiconductor market forecast, reported Global semiconductor revenue is projected to decline 11.2% in 2023. In 2022, the market totaled $599.6 billion, which was marginal growth of 0.2% from 2021.

There is a significant revenue drop for semiconductor memory manufacturers and also for computer processor vendors, mainly Intel.

Vendor wise revenue growth of some leading and key vendors in 1Q2023: : Memory, personal computer processor, Smart phone chip vendors posted severe drop in revenues in the first quarter of 2023. Samsung, SK Hynix, Micron, Intel, Qualcomm, and Mediatek, have reported huge fall in revenues. AMD performed better than others. TSMC, foundry partner of leading chipmakers also reported quite a fall in revenue.

Whereas industrial, automotive and IOT focused integrated device manufacturers have reported a lot better performance compared to vertically focused PC and smartphone chipmakers. Smaller companies looks to have performed a lot better than big companies. The three different charts below displays that trend. You can see AMD handling downturn better than Intel and others. Intel nearly crash-landed, where as AMD goes for near flat slope. You can see the slope angle in the charts below:

semiconductor vendor revenue 2023

Above Chart: Performance of some of top ten semiconductor vendors

semiconductor vendor revenue 2023

Above Chart: Performance of some of top IDM semiconductor vendors

semiconductor vendor revenue 2023

Above Chart: Performance of medium size semiconductor vendors

(Revenue in Billions of US$s)

PC/Note book and smart phone market update in 1Q2023:

Canalys' latest finding on PC Market: In the first quarter of 2023, the total shipments of desktops and notebooks declined 33% to 54 million units. Canalys finds notebook shipments suffered a large decline, falling 34% year-on-year to 41.8 million units. Desktop shipments performed slightly better, undergoing a 28% decline to 12.1 million units.

Canalys reported that global smartphone shipments fell by 13% to 269.8 million units in Q1 2023. Before 2022, while most of the market turned weak, Indian smart phone market was comparatively far better. Where as now, Indian market too showing decline where Canalys research shows that the Indian smartphone market had a tough start to 2023, witnessing the first-ever Q1 shipment decline of 20% year-on-year.

Other Key Market and Technology Trends:

Automotive, AI, and IoT based smart systemization driving the demand in 2023. AI is driving server market in a big way. Gaming market to grow leading to growth of AR/VR systems and wearable computing in 2024 and later. ChatGPT like AI services triggering growth in server market and the demand for such servers.

FPGA market is growing. Lattice Semiconductor reported a revenue increase of 22% in 1st quarter 2023 compared to 1st quarter 2022 and 5% compared to 4th quarter 2022.

Supply chain issues have eased even in automotive sector. Shortage of semiconductor workforce is a big hurdle for expansion. Geopolitical issues are driving a different trend of localization. Semiconductor is now more strategic to security for each nation.

Semiconductor memory market:
Memory Business will respond to increasing demand for DDR5 and high-density modules led by the launch of new CPUs for servers and increased demand for AI and will also actively respond to LPDDR5x demand for mobile high-end products such as new form factor smartphones. Demand and growth predicted for for 200+ layer NAND flash.
Global Memory Market research report from Global Market Insights finds "Global Semiconductor Memory Market was estimated at USD 160 billion in 2022 and is expected to surpass a valuation of $340 billion by 2032, progressing at a CAGR of 7.5% from 2023 to 2032."
SRAM semiconductor memory industry is set to generate more than USD 900 million in revenue by 2032.

Gartner in latest release said “The memory industry is dealing with overcapacity and excess inventory, which will continue to put significant pressure on average selling prices (ASPs) in 2023. The memory market is projected to total $92.3 billion, a decline of 35.5% in 2023. However, it is on pace to rebound in 2024 with a 70% increase.” Gartner also shared these below findings on memory market:
The DRAM market will witness significant oversupply for most of 2023 due to weak end-equipment demand and high inventory levels despite flat bit production by DRAM vendors. Gartner analysts foresee DRAM revenue will decline 39.4% in 2023 to total $47.6 billion. The market will move to undersupply in 2024 and DRAM revenue is set to increase 86.8% as pricing rebounds.
Over the next six months, Gartner expects the dynamics for the NAND market will be similar to the DRAM market. Weak demand and significant vendor inventory will create oversupply resulting in strong price declines. As a result, NAND revenue is projected to decline 32.9% to $38.9 billion in 2023. In 2024, NAND revenue is projected to increase 60.7% due to a deep supply shortage.
In parallel, both the automotive and industrial, military/civil aerospace semiconductor markets will achieve growth. The automotive semiconductor market is forecast to grow 13.8%, reaching $76.9 billion in 2023.
In the future, there will be many more but smaller end markets. End markets will be more fragmented, with pockets of growth coming from multiple different sectors in the automotive, industrial, IoT and military/aerospace sectors.

Comments made by market research analysts and top executives of chip industry:

Richard Gordon, Practice Vice President at Gartner
“As economic headwinds persist, weak end-market electronics demand is spreading from consumers to businesses, creating an uncertain investment environment. In addition, an oversupply of chips which is elevating inventories and reducing chip prices, is accelerating the decline of the semiconductor market this year”.

Kim Woohyun, Chief Financial Officer at SK hynix
“With SK hynix having secured a top-notch competitiveness for the lineup of products, of which growth in demand is materializing from this year, such as DDR5/LPDDR5 and HBM3, the company will solidify its leadership in the premium market by increasing the sales volume of such products,”. “The memory market, which is still under tough conditions, seems to be bottoming out,”

Dr. Lisa Su, Chair and CEO of AMD
“We launched multiple leadership products and made significant progress accelerating our AI roadmap and customer engagements in the quarter. Longer-term, we see significant growth opportunities as we successfully deliver our roadmaps, execute our strategic data center and embedded priorities and accelerate adoption of our AI portfolio.”

Jean Hu, EVP, CFO and Treasurer of AMD
“Our strategically important Data Center and Embedded segments contributed more than 50 percent of revenue in the first quarter," said. "For the second quarter we expect sequential growth in our Data Center and Client segments offset by modest declines in our Gaming and Embedded segments. We remain confident in our growth in the second half of the year as the PC and server markets strengthen and our new products ramp.”

Kishore Seendripu, Chairman and CEO of Maxlinear
“In the first quarter, we delivered $248.4 million in revenues, improved our gross margins, and generated strong cash flow from operations of approximately $42 million. Our infrastructure category was strongly up 46% sequentially and 40% year over year, primarily driven by the expanding roll-out of multi-band millimeter wave and microwave 5G wireless backhaul platform solutions. We also continue to work towards the antitrust approval of our pending acquisition of Silicon Motion, and are excited by the future growth prospects of our comprehensive combined product portfolio.

“Even as we navigate a challenging demand environment with fiscal discipline and operational efficiency, our solid execution and innovative product offerings are enabling us to maximize strategic business opportunities across all our end markets. In 2023, we continue to lay important groundwork in Wi-Fi, fiber broadband access gateways, and wireless and optical datacenter network infrastructure, which will be the foundation for our growth later this year and throughout 2024,”

Cristiano Amon, President and CEO of Qualcomm
“The long-term trends driving demand for our differentiated technologies and solutions that enable digital transformation are intact. We are confident in our ability to navigate the near term and remain focused on executing our diversification strategy.”

Hassane El-Khoury, President and CEO of onsemi
“We continued our momentum with first quarter results exceeding expectations despite macroeconomic uncertainties. Our accelerating Silicon Carbide manufacturing output exceeded our internal plans and enabled us to nearly double our silicon carbide revenue quarter-over-quarter, and we grew both ADAS and energy infrastructure revenue by approximately 50% year-over-year. As secular tailwinds propel our business, we are prudently managing our operations to deliver consistent and predictable results in the current market environment,”.

Jim Anderson, president and CEO Lattice Semiconductor, said, "Our strong growth and customer momentum continued into the first quarter of 2023 with a 22% year-over-year increase in revenue. We drove 55% year-over-year growth in net income on a GAAP basis and 36% on a non-GAAP basis. While we’re not immune to macro-economic challenges impacting the industry, we have Lattice-specific growth drivers, which position us well for long-term growth in our core markets."

Linkedin post by Vivek Thyagi GM ( BU Head) at Rashi Peripheral
"Several memory chips developed for applications in intelligent machines and virtual reality gadgets by the gaming industry players are being used in gaming hardware. In addition, the growing inclination towards gaming in China and other Asian countries would significantly influence the semiconductor memory market growth in the coming years."
Read the previous related article:
Mid 2022 semiconductor market update: Mem and PC-CPU down and others not

Resources and references:

Author: Srinivasa Reddy N
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